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Con Edison, New York’s largest gas supplier, announced earlier this month it wants to spend $305 million on a package of measures to shave natural gas consumption. At the same time, the utility is pursuing additional gas pipeline capacity for its service territory in the greater New York City area.
The October 1 proposal includes non-pipeline measures to ensure natural-gas system reliability and reduce winter peak gas demand.
The utility wants to build as many as five compressed and liquefied natural gas storage sites in Westchester County, and construct up to three facilities that convert organic waste into locally sourced renewable natural gas, to reduce the need for pipeline-sourced gas on peak winter days.
The proposal also includes provisions to electrify space heating in selected neighborhoods. Plans call for the installation of ground-source heat pumps at up to 8,800 single-family homes in Westchester County and air-source heat pumps at up to 1,000 small- and mid-sized multi-family buildings in the Bronx that use fuel oil for heating.
Incentives to install heat pumps would also be provided to an additional 1,000 small commercial and large residential buildings in the region.
Con Edison asked the New York Public Service Commission to approve the funding request by the first quarter of 2019. The utility said the approved funding would increase the average residential customer’s gas bill by 1.5 percent, or about $2 per month, by 2025.
Regulators urge non-pipeline alternatives
In all, the measures in Con Edison’s proposal aim to reduce peak natural gas demand by 84,500 dekatherms — about 5 percent of peak gas load, Con Ed spokesperson Allan Drury told Greentech Media in an email.
In a document filed with the New York Public Service Commission (PSC) on September 28, Con Edison also said it is “considering issuing an additional marketplace solicitation for non-pipeline resources in the near future” and that “a temporary moratorium on new gas customer connections remains a possibility.”
Even so, according to the utility, the suite of measures in its “Smart Solutions for Natural Gas Customers Program” will not be enough to solve the natural-gas supply crunch in the area.
“These measures do not eliminate the need for a new natural-gas pipeline to keep up with our region’s energy needs,” Marc Huestis, Con Edison’s senior vice president of gas operations, said in a statement.
Drury confirmed via email that “a pipeline is needed to meet the demand for natural gas” and Con Edison is “discussing options with pipeline companies.”
That stance is at odds with the position taken by the New York PSC.
“The Commission encourages the development of smart alternatives, rather than the antiquated approach of simply building ever more pipelines,” said the PSC in an August 9 statement announcing the approval of Con Edison’s three-year, $5 million pilot program to reduce natural gas demand in the New York City area.
Under the program, third-party demand response aggregators will partner with Con Edison customers to reduce peak gas consumption. An initiative modeled on Con Edison’s existing demand response program for electricity will target large commercial and industrial customers. Participating residential and small commercial customers will reduce gas demand via internet-connected smart thermostats.
In combination with an “enhanced” gas energy efficiency program approved by the PSC on July 12, which doubled Con Ed’s efficiency targets through 2020, the demand response pilot program “represents the next step toward a more holistic view of a gas utility’s obligation to meet the needs of its customers by exploring alternatives to its traditional utility business model," according to the PSC.
It added, “The Commission will continue to work with Con Edison and other gas utilities to ensure success of non-pipes alternatives.”
The PSC and Con Edison do agree that increased natural-gas demand in New York City and Westchester County is a concern. The PSC recently noted that “demand for natural gas in Con Edison’s service territory has grown substantially” — especially during the winter heating season.
According to Con Ed’s Drury, the gas load on peak winter days has increased by more than 30 percent since 2011.
A new pipeline and New York’s climate goals
In an interview, N. Jonathan Peress, senior director of energy market policy at the Environmental Defense Fund, praised Con Edison for pursuing non-pipeline alternatives, but cautioned that the utility must explain how a new pipeline would align with New York’s ambitious climate goals.
“They should be complimented for developing non-pipeline alternatives,” he said. “Storage is highly cost-effective for meeting peak winter demand. Electrification for space and water heating is necessary to meet both New York City’s and New York state’s climate goals. This is a step in the right direction.”
“Ultimately,” he said, “Con Ed will need to demonstrate how committing their customers to pay for new pipeline capacity over a 40- or 50-year useful life is consistent with New York state and New York City climate goals.”
In order to “protect ratepayers from undue bill impacts related to unsuccessful pipeline projects,” the PSC denied Con Edison’s request to recover pipeline development costs when it approved the utility’s enhanced gas energy efficiency program in July.
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